The trade body retrospectively calculated the impact of the FTT on transactions which took place in 2011 and found that those involving clients outside of the FTT zone, including UK-based clients, would have been subject to charges of €5.7bn.
The figure includes the tax on redemptions (€1.2bn) and on portfolio transactions (€4.4bn). Meanwhile, tax costs to those inside the FTT zone, which has been adopted by 11 EU nations, would have amounted to an additional €7.3bn.
However, these costs could be much higher, not least because fund managers will need to adopt new administration systems and establish different ordering systems for clients based inside and outside of the FTT zone.
The tax would also affect the value of derivatives transactions, given that many Ucits products look to remove currency exposure through hedging, while the EFAMA estimates that the tax will reduce the annual investment performance of multi-manager funds domiciled in the FTT zone by around 1% per year.
FTT charges
That the tax is applicable multiple times, and is payable by both the fund manager and the client, means that the end cost in every type of transaction is more difficult to calculate.
Peter de Proft, director general of EFAMA, said: “EFAMA is extremely concerned about the detrimental impact of the new FTT on investors in funds including retail investors and savers participating in pension plans and the European economy, especially those of Member States within the FTT-zone.
“EFAMA strongly opposes an FTT which will result in fund investors paying the tax (at least) twice, and which will drastically reduce the attractiveness of saving through funds and pension plans. This result would be wholly unjustified in the light of the important social role investment funds play, and the global reputation that Ucits has acquired as a model of excellence in the long-term savings market.
“EFAMA is also concerned about the distortions to the Single Market damaging the competitiveness of the resident financial institutions leading to unjustified delocalisation out of the FTT zone.”
